Whiting, Calumet drive-bys price, also VeriSign, Townsquare; existing Whitings off with deal

By Paul A. Harris and Paul Deckelman

New York, March 24 – The pace of activity in the high-yield primary arena picked up markedly on Tuesday, led by opportunistically timed and quickly shopped deals from energy operator Whiting Petroleum Corp. and specialty hydrocarbon products and fuels manufacturer Calumet Specialty Products Partners, LP, as well as regularly scheduled forward calendar offerings from internet domain-name and infrastructure security provider VeriSign Inc. and broadcaster Townsquare Media Inc., with VeriSign upsized and Townsquare downsized.

All told, those four single-tranche deals totaled some $1.875 billion of new dollar-denominated and fully junk-rated paper – well up from the $447 million that had priced in two tranches on Monday, according to data compiled by Prospect News.

The new VeriSign bonds were seen by traders to have moved up on heavy volume, while Whiting’s new deal was quoted trading below issue. Whiting’s existing bonds, meantime, sold off, some in heavy trading, in response to the new-deal news and in line with a big drop in the company’s shares following an equity offering and a concurrent convertibles placement.

Among recently priced issues, there was considerable secondary market activity in Monday’s new deal from Rice Energy Inc. and Thursday’s Rite Aid Corp. megadeal.

Away from the issues that have already priced, primaryside players were looking for likely pricings Wednesday from Consol Energy Inc. and Cliffs Natural Resources Inc.

Statistical indicators of junk market performance were mixed on Tuesday versus their levels the session before, after having been higher over the previous two sessions.

Whiting comes wide

Four issuers completed single-tranche deals in Thursday’s primary market session, raising an overall total of $1.87 billion.

Two of the four deals came as drive-bys.

One was upsized, while one was downsized.

The executions were less than tight, with one deal coming wide of talk, two pricing at the wide ends, and one pricing at the tight end.

In the day’s biggest deal, Whiting Petroleum priced a $750 million issue of non-callable eight-year senior notes (Ba2/BB) at par to yield 6¼%.

The yield printed 12.5 basis points beyond the wide end of yield talk that had been fixed in the 6% area.

J.P. Morgan, BofA Merrill Lynch, Wells Fargo, SunTrust and US Bancorp were the joint bookrunners.

The Denver-based energy company plans to use the proceeds, along with funds raised from offerings of stock and convertible securities, to repay all or part of the amount outstanding under its credit agreement, with any remainder for general corporate purposes.

VeriSign brings $500 million

VeriSign sold an upsized $500 million issue of non-callable 10-year senior notes (Ba1/BB+) at par to yield 5¼%.

The deal was increased from $400 million.

Pricing was at the tight end of guidance that had been set at 5¼% to 5½%. Initial talk was in the 5½% area.

The deal had been in the market as a split-rated Baa3/BB+ offer. However during Tuesday’s session Moody’s downgraded the bonds to Ba1 from Baa3.

Although the notes come with investment-grade covenants, the deal was priced on the high-yield syndicate desk, according to a trader.

J.P. Morgan, BofA Merrill Lynch and U.S. Bancorp were the joint bookrunners.

Proceeds will be used for general corporate purposes, including the repurchase of shares under the company’s share repurchase program.

Calumet prices at a discount

Calumet Specialty Products Partners priced a $325 million issue 7¾% eight-year senior notes (B2/B+) at 99.257 to yield 7 7/8% on Tuesday, according to a syndicate source.

The yield printed at the wide end of yield talk in the 7¾% area.

Initial guidance was in the high 7s, according to a trader.

BofA Merrill Lynch was the left bookrunner. Barclays, J.P. Morgan, RBC and Wells Fargo were the joint bookrunners.

The Indianapolis-based producer of specialty hydrocarbon products and fuel products plans to use the proceeds, together with a portion of the proceeds from a recent equity offering, to fund the redemption of all $275 million of its 9 5/8% senior notes due 2020, as well as to repay revolver debt and for general partnership purposes, including capital expenditures and working capital.

Townsquare downsizes

Townsquare Media priced a downsized $300 million issue of eight-year senior notes (B3/B-) at par to yield 6½%.

The debt refinancing deal was reduced from $300 million.

The yield printed at the wide end of the 6¼% to 6½% yield talk.

BofA Merrill Lynch was the left bookrunner. RBC, SunTrust, Macquarie and Jefferies were the joint bookrunners.

Consol Energy for Wednesday

Consol Energy plans to price a $650 million offering of eight-year senior notes on Wednesday.

An investor conference call was scheduled to take place on Tuesday.

Goldman Sachs, PNC, BofA Merrill Lynch, Credit Suisse, J.P. Morgan, MUFG and Wells Fargo are the joint bookrunners for the debt refinancing.

GCI to start roadshow

GCI, Inc. plans to begin a roadshow for a $450 million offering of 10-year senior notes (expected ratings B3/B+) on Wednesday in New York.

The debt refinancing deal is expected to price Friday.

SunTrust is the left bookrunner. BofA Merrill Lynch and Credit Agricole are the joint bookrunners.

Cliffs sets price talk

Iron ore producer Cliffs Natural Resources talked its $500 million offer of five-year first-lien senior secured notes (Ba2/BB-) to price at 93 with a yield of 9%.

Call protection was increased to three years from two years.

The deal was expected to price Tuesday, however no terms were available at press time.

The book, at $400 million, was shy of the deal size on Tuesday morning, according to a market source who added that in addition to the extra year of call protection investors would like to see the call premium increased from the initial coupon plus 50%.

BofA Merrill Lynch, Jefferies, Deutsche Bank and Credit Suisse are the joint bookrunners.

In the same industry sector, Australian iron ore producer Fortescue recently abandoned a $2.5 billion offering of secured notes, directly on the heels of walking away from a $2.5 billion bank loan by shifting the proceeds to that notes offer.

Fortescue explained in a press release that in the present market its “disciplined cost objectives were not met.”

The deal had been talked at 8% to 8¼%.

The company walked away from the deal at 8¾%, a sellside source said on Tuesday.

They had an anchor order at that level but elected not to go forward, the sellsider added.

Elsewhere market sources told Prospect News that there was certainly a deal to be done for Fortescue at 9%.

Positive flows for junk

Although recent weekly fund flow reports have been strongly negative, the most recent data on daily fund flows was positive, a trader said on Tuesday.

High yield ETFs saw $342 million of inflows on Monday, the most recent day for which data was available at press time.

Actively managed funds saw $40 million of inflows on Monday.

Tuesday’s numbers, when they surface, should be strongly positive, a trader said Tuesday afternoon, noting that high-yield ETFs were active buyers during the session despite the fact that the stock market traded lower.

VeriSign very busy

In the secondary realm, traders saw extremely active aftermarket activity in VeriSign’s new 5¼% notes due 2025 at levels a little above the par level at which the Reston, Va.-based internet domain-name and infrastructure security provider’s issue priced.

A trader quoted the new notes in a 100¼ to 100½ bid context, while a second saw them moving around between 100 1/8 and 100 5/8 bid.

At another desk, a market source pegged the bonds at 100½ bid, with over $74 million having changed hands by the close.

Whiting notes easier

A trader said that Whiting Petroleum’s new 6¼% notes due 2023 were trading in a 99½ to par context, versus the par issue price at which the credit had come to market earlier.

“There was a fair amount of trading, pretty good volume” in the new bonds, he opined.

“There weren’t buyers until it dipped below par,” he concluded.

But the oil and natural gas exploration and production company’s existing bonds were down sharply on the news of the new deal, and were also probably hurt by a slide in the company’s New York Stock Exchange-traded shares.

A trader saw the company’s 5¾% notes due 2021 plunge 5½ points to 100¾ bid on volume of more than $56 million.

A second trader said the bonds were off by 6 points on the day at 100¼ bid – and at one point had dropped as low as 99 bid, down from Monday’s pre-deal-news levels around 106 bid.

“They sold off this morning when the new deal was announced,” yet another trader said, noting their previous 106 to 107 bid context at the end of last week, versus Tuesday’s 100 to 100½-type range.

“The [whole capital] structure sold off on the news,” he continued.

Whiting’s 5% notes due 2019 dropped by 2 3/8 points, to 98 7/8 bid, versus prior levels around 101¼ bid. More than $13 million changed hands.

However, Whiting’s 8 1/8% notes due 2019 actually gained 5/8 point to end at 104¾ bid, with over $15 million traded.

The slump in most of Whiting’s bonds coincided with a plunge in its NYSE-traded shares, which swooned by $7.48, or 19.48%, to close at $30.91. Volume of 58.1 million shares was over six times the norm.

The shares slid after the company announced the pricing of 35 million new shares at $30 – down from the levels at which the shares had traded as recently as Monday.

Like most energy names, Whiting’s shares and bonds are currently trading well down from where they had been, say, last summer – the shares were above $92 last August – in response to sagging world crude oil prices.

The equity sale was also interpreted by the market as signaling an end, at least for now, to any hopes investors may have entertained that the company might be bought out at a hefty premium by a petroleum industry behemoth such as ExxonMobil Corp.

Recent deals seen active

Among recently priced bond offerings, a trader saw Rice Energy’s 7¼% notes due 2023 “wrapped around par.”

A second market source said the bonds were off by 3/8 point, locating them in a 99 7/8 to 100 3/8 bid context.

At another desk, the notes were quoted down ¼ point at par, on volume of over $38 million, putting them high up on the day’s Most Actives list, behind only the new VeriSign bonds and the Whiting 2021 notes.

Canonsburg, Pa.-based independent oil and gas company Rice priced $400 million of the notes at 99 233 on Monday as a drive-by transaction, yielding 7 3/8%. The new bonds were seen going home late Monday about 1 point north of their issue price.

As had been the case on Monday, a trader said Tuesday that Rite Aid’s 6 1/8% notes due 2023 “have held steady” in a 101¼ to 101½ context, about where the Camp Hill, Pa.-based Number-Three U.S. drugstore chain operator’s new deal had traded after the $1.8 billion scheduled forward calendar deal priced at par this past Thursday.

A second trader saw the notes up 1/8 point on the day at 101½ bid, with more than $24 million traded, on top of Monday’s $25 million of turnover.

That was down from the more than $99 million that had traded on Thursday after the deal priced, or Friday’s super-heavy turnover of more than $144 million. Those bonds firmed solidly from the get-go on Thursday and had retained their gains on Friday, while strengthening a little on Monday and Tuesday.

HD Supply better

Away from the new issues, traders saw some upside movement in HD Supply, Inc.’s bonds, after the Atlanta-based industrial products distributor reported fiscal fourth-quarter and full-year earnings.

Its 7½% notes due 2020 gained 7/8 point on the day, ending at 106¼ bid on volume of over $10 million, while its 5¼% senior secured first-lien notes due 2021 firmed by ¼ point to 103 bid, with over $7 million of those notes changing hands.

On the conference call following the release of the results, company executives recounted how last year’s term loan re-pricing, a refinancing transaction for one of its bond issues and free cash flow-funded debt reduction led to considerable interest savings. They said that they again plan to use any free cash flow generated this year for debt reduction (see related story elsewhere in this issue).

Indicators turn mixed

Statistical indicators of junk market performance were mixed on Tuesday versus their levels the session before, after having been higher over the previous two sessions.

The KDP High Yield Daily Index moved up by 4 basis points on Monday to 71.12, its third straight gain and its fourth such advance in the prior five sessions. On Monday, it had been up by 2 bps.

Its yield, meanwhile came in by 2 bps on Tuesday, declining to 5.41%, its fourth straight narrowing. It had eased by 1 bp on Monday.

But the Markit Series 23 CDX North American High Yield Index lost 1/16 point on Tuesday to end at 107 29/32 bid, 107 15/16 offered, after having been essentially unchanged on Monday. The index had risen by 11/32 point on Friday – its second advance in three sessions and its third in the previous five.

The Merrill Lynch U.S. High Yield Master II Index notched its fourth consecutive gain on Tuesday, rising by 0.112%, on top of Monday’s 0.091% improvement. The gains followed four straight losses before that.

Tuesday’s advance raised its year-to-date return to 2.298% from Monday’s 2.184%, although it remained down from its peak 2015 level of 3.125%, set on March 2.

© 2015 Prospect News.
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